Key Points
- The Nasdaq Composite entered correction territory, down over 10% from its recent high. It has gained 21.9% in the 12 months following a correction close.
- Amazon’s projected earnings growth is 23% annually, and its price target implies a 26% upside.
- Zscaler’s robust SSE platform and projected 21% annual revenue growth position it for a 38% upside.
- While short-term challenges persist, Amazon and Zscaler present potential long-term investment opportunities.
According to The Motley Fool, the Nasdaq Composite entered correction territory on August 2 after dropping over 10% from its recent high. This decline contributed to disappointing U.S. labor market data, which showed fewer job additions in July than expected and a rise in unemployment to its highest level since 2021.
Despite these challenges, historical data suggests a positive outlook. Over the past 15 years, the Nasdaq has averaged a 21.9% gain in the 12 months following its first correction close, implying a potential 22% upside by August 2025. Wall Street analysts also anticipate strong Amazon (AMZN) and Zscaler (ZS) performance.
Amazon is poised for growth across its core markets: e-commerce, digital advertising, and cloud computing. According to various industry reports, the company is projected to capture 40.4% of U.S. online retail sales this year, increase its share of digital ad spending to 13.9%, and hold 32% of the cloud infrastructure market.
Despite narrowly missing Q2 revenue estimates with a 10% increase to $148 billion, Amazon’s GAAP earnings surged 94% to $1.26 per diluted share. However, slower growth forecasts for Q3 have weighed on the stock. Nevertheless, Wall Street expects Amazon to grow earnings at an annual rate of 23% over the next three years, suggesting its current valuation remains attractive.
Zscaler specializes in zero-trust network access and has seen growth driven by its SSE platform. It offers improved user experience, cost savings on security appliances, and enhanced threat detection through AI-driven insights. In Q4 of fiscal 2024, Zscaler’s revenue rose 30% to $593 million, while non-GAAP net income grew 38% to $0.88 per share.
Despite these strong results, Zscaler’s stock dropped 17% due to slower growth projections for fiscal 2025, attributed to sales team turnover. However, Wall Street remains optimistic, with expected annual revenue growth of 21% over the next three years.
